WTI crude oil is trending lower and is moving inside a descending channel on its 1-hour time frame. Price is currently bouncing off the channel resistance and could resume the drop to the swing low or channel support.

The top of the channel lines up with the 61.8% Fibonacci retracement level, which served as an extra layer of resistance. The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. This means that the selloff is more likely to resume than to reverse.

Stochastic is on the move down but dipping into oversold territory to signal exhaustion among sellers. This could lead to a bounce back to the nearby resistance levels before heading any lower. RSI has more room to head south, so the selloff could still go on.

US oil rig activity reportedly ticked higher in the previous week to reach its highest level since September. Note that US oil production is already up by more than 15% since the middle of last year to 9.71 million barrels per day, which is also its highest level since the 1970s.

This has led most market participants that the OPEC output deal and extension could be effective. Apart from that, the potential review of the deal by June next year also runs the risk of having the deal called off before the actual deadline at the end of the year.

Data from the American Petroleum Institute and the Energy Information Administration are lined up this week, and a major build in stockpiles could put further downside pressure on crude oil. Recall that the Keystone Pipeline which was temporarily shutdown due to a spill was reopened a few days back, which means more oil supply flowing to the US and less reduction on their inventories.